All right, so now we talked about all the terminology for

a salary structure, our midpoints, our control points, our grades, our ranges.

Now I want to talk about how we actually determine what those should be.

That is, what are the criteria for our raises and

promotions within the organization?

First of all, we have to remember that the pay structure isn't everything.

The pay structure determines base cash.

Base cash is only one of four elements of the pay mix, along with short-term

incentives, long-term incentives and our benefits and perks.

And even then our pay mix is only one part of the full employee value proposition.

Also included in the employee value proposition, isn't just their pay and

the total comp, but it's also all of the non-cash awards.

And all the other things that makes people come and excited to work for

the organization every morning.

So, before you design, you have to know our three M's.

Remember, these are money, our mix, and our messaging.

The salary structure communicates how employees progress in the organization.

And this is important because a salary structure,

even though it determines just base pay and base pay is only one element of

the pay mix, it's of course a very big part of the pay mix.

And it's the main way the organization gets to communicate.

This is the thing that we value.

This is how you progress with the organization.

This is how you get promoted.

This is how you get raises.

And so, first of all, so lets talk about our different raise criteria, and lets go

back to our new engineer whose just out of college and just joins our organization.

As they come at the bottom of the junior engineer's pay structure.

And of course they're going to come and they're going to be interested in what it

is that they need to do to get raises and ultimately promoted.

And so, that's going to be determined by whatever the organization's policy

regarding raises are.

So one method is to tie the raises based on tenor schedule.

So, for example, what we have here is,

when you come into the organization you may earn a wage of $10 per hour.

And then as you stay with the organization, then eventually,

you'll get raises up to a rate of $15.50 per hour if you stay as a junior engineer.

And so what does this communicate to our employees?

This communicates that we value tenure,

that we value loyalty, and we value being in the organization for a long time.

And it's those people who are in the organization for

a long time who are going to get to the top of their wage schedules.

But this isn't the only method that we can use for determining raises.

Here's another method.

So let's say that we wanted to tie raises to our performance ratings.

And so, this is an example of a method of communicating to employees that we also

value, both your tenure, because that lets you climb in the organization,

but we also value your score on these different ratings.

And so, here's an example of a raise schedule.

So, here you'll notice that the people who get the largest raises

are those who are relatively low within the ranges.

So they have a lot to climb.

And they also have the highest performance ratings.

And so, those employees who have outstanding performance ratings,

but are also relatively low within that range, are going to get raises of 5 or 6%.

In contrast,

there's going to be some people who don't get any raises in this context.

So, one group of people who won't get raises are those who

are above the maximum salary range.

So, they don't have anywhere to climb.

And so, regardless of whether they have an outstanding performance rating or

an unacceptable performance rating, they're not going to be eligible for

a raise.

The other people who aren't going to be eligible for a raise are those who get

performance ratings of below expectations or unacceptable.

And again, it doesn't matter where they are on the salary schedule,

whether they're relatively low or relatively high.

Those who have low performance ratings under this kind

of a policy would not get a raise.

And so let's look at our promotion criteria.

So again, with our raises we communicate the different things you have to do in our

organization to succeed and to to do well and to get a raise.

Let's look at the things we need to do to get promoted to a higher grade.

And therefore, as we go from being at the top of our old range to

the bottom of our next range, we'll also be eligible for larger raises as well.

There's a few different ways that we can rank-order our jobs.

So one method is through the jobs, which is

where the grades are determined by the tasks that employees perform.

Another is determined by the skills.

Such as the skill, their certifications, licensures, or the job requirements.

And the last one is the competency-based rankings,

which is determined by demonstrated behavioral competencies.

And each of these communicates something different about what it is that we value.

Whether it's the jobs that you perform, the skills or the licensures or

certifications that you have, or the behavioral competencies,

such as the ability to lead people.

And it's also a good example of a skill-based structure.

So here we have a structure from a public school district in the United States.

And what you'll notice here is that it's rank ordered by years of service.

And so, the longer you are within your particular grade,

then the more pay you'll get.

And the grades themselves are determined by your highest degree of

educational attainment, and additionally, how many extra credit hours you have.

So for example, let's say that you had somebody who had a bachelor's degree with

no extra credit hours, and they're just entering our school district.

Then this would be someone who would be paid a salary of $34,048 per year.

And, as they grow in tenure in the organization, if they don't get any

additional educational attainment, they can make up to $38,787 per year.

Now, at this point, after 8 years of service,

they wouldn't be eligible for future increases.

Rather, to get additional pay, they would also have to do additional course work.

So let's say that they did 15 credit hours of additional course work.

Then this person, if they have entered in with 0 years of

service would be making about $900 more when they entered and

would also be eligible for a higher gap.

And indeed, the people who'd be making most in this kind of a structure would

be those who are in the highest grade,

should be those with either a masters with a lot of extra course work or a PhD.

And who also have a lot of experience, 16 years or more of experience.

These people would be making a salary of $64,174 per year.

And so, again, kind of the big picture is that we want to establish our raise and

promotion criteria to communicate what it is that our organization values.

So thanks, and I'll see you next class.

Base Pay: 1.3.3 Assigning Grades and Ranges

Human Resources Management Capstone: HR for People Managers

Meet the Instructors